South Dakota

House committee squashes half-century tax break for SD data centers

Published

2 days ago

February 4, 2026

House committee squashes half-century tax break for SD data centers

PIERRE — Controversial data centers built in South Dakota won’t get a sales tax break—at least not yet.

The House State Affairs committee met Feb. 4 to weigh House Bill 1005, a bill which would have given owners and operators of qualifying data centers exemptions on the state’s sales and use tax for investments made in computer software and “enterprise information technology equipment”—a wide array of computer hardware, servers, power infrastructure, maintenance and security systems.

The exemption would apply to data centers that are issued a building permit between July 1 and June 30, 2036.

Data centers are physical facilities that house servers and networking equipment, which are typically used to store, manage, process and distribute large amounts of data.

Some of the common types of modern data centers include:

AI data centers, which are specifically designed to support artificial intelligence applications;
Colocation data centers, where third-parties manage the servers and components;
Cloud data centers, where major providers, like AMS, Microsoft and Google, host cloud-based data and applications; and
Enterprise data centers, which are often used for private uses by corporations.

Particularly large data centers are sometimes known as “hyperscalers.” These facilities can cost hundreds of millions to billions of dollars and require hundreds of acres of land to build, with construction at-times occurring in multi-year phases.

The legislation would have required businesses to submit documentation to the secretary of the state Department of Revenue, who would determine if the data center’s eligibility for the tax exemption.

A data center would have been able to receive the break if it could prove the facility’s electrical demands were under a written agreement or rate schedule that avoids shifting electrical costs to other consumers; and notice was given to local water providers that the site’s water consumption was “compatible for the location,” per the bill’s language. Data center owners would have also had to file an annual affidavit that discloses whether the business continues to meet the eligibility criteria.

However, those documents would have been considered confidential under the proposed legislation.

The bill was rejected by the committee, with nine members voting for and three against the legislation. Sioux Falls Republican Bethany Soye was excused from the vote.

Supporters of the legislation told committee members the sales tax break was essential to give data center investors and developers enough incentive to build in the Mount Rushmore state.

State Rep. Kent Roe, R-Hayti, who drafted the legislation, urged the committee to green-light the tax break on the premise that the state would reap a bounty of benefits—from “immense” property tax revenue and the creation of new high-quality jobs, to diversifying the state’s economic makeup.

Roe said other states have already legislated or otherwise implemented sales tax exclusions, and South Dakota needs a similar policy to remain competitive.

“We tax this technology higher than most,” Roe said. “That’s the truth. President Trump has stressed America’s need to lead. Our senators and congressmen highlight AI’s role in health care and national security. This is a national concern.”

Data center lobby uses well-worn revenue pitch

Steve DelBianco, president of NetChoice, a D.C. e-commerce trade group, threw out big numbers to buoy the benefits argument. Over the next 10 years, he projected $333 milllion of new property tax revenue to South Dakota from data centers alone.

For Jay Grabow, chair of the Deuel County Commission, the existential crisis his area faces is real. In 1920, per historical U.S. Census publications, Deuel County once called 8,759 people local inhabitants. Fast-forward to 2024, the county’s population has more-than-halved to 4,335, according to the U.S. Census Bureau.

Some of that Grabow attributes to the farming industry becoming more efficient over time—driving people per acre down—and the loss of at least one 200-employee business.

That means increased taxes over a smaller taxable population, Grabow said. And it also means Dallas-based Applied Digital, which is proposing a 430 megawatt AI data center east of Toronto, South Dakota, is, in the commissioner’s eyes, a means to lowering property taxes.

“We’re merely trying to keep what we had, merely trying to figure out a better way to do property taxes than to burden it on the people,” Grabow said. “If we can spread that across a $400 million billing, we have $1.1 billion of assets today. That’s a nearly-40% increase on our assets that we can spread those taxes across. That’s a 10 to 15% property tax [cut] across the board for those people.”

The economic windfall arguments resembled the debate over carbon pipelines over the last several years, when pipeline companies and some analysts projected an Iowa company’s transmission line could generate billions in the state and lower local taxes, as seen in previous Argus Leader reporting.

DelBianco said businesses and governments have increased their use of the cloud in recent years. The tech industry is tasked with building 50 data centers a year to keep up with U.S. demand, he added.

But the supply can’t be met if South Dakota doesn’t give developers and businesses a big-enough carrot to offset the significant capital investments they would make, DelBianco said.

Nick Phillips, executive vice-president for external affairs of Digital Applied, said South Dakota has been “unintentionally tax[ing] itself out of this market” under the current tax policy.

“The siting decision is binary,” Phillips said. “A project is built here or it is built somewhere else … Other states are capturing the investment, the jobs, and the long-term tax base.”

“The truth is that it’s just fiscally irresponsible to spend a billion dollars on a data center and have the equipment [that] goes in there, be subject to sales tax, when a billion dollar manufacturing, agricultural, another facility doesn’t pay sales tax on its equipment,” DelBianco added . “There are 40 states that exempt the equipment, so we have to pick the states that welcome through that policy.”

Data center opposition says tech threatens South Dakota’s largest industry

But opponents viewed the Big Tech push as an infringement upon South Dakota’s already No. 1 industry: agriculture.

Michelle Oftedahl, a Toronto, South Dakota, farm owner who lives a few miles away from Applied Digital’s proposed data center, spoke to the “unintended consequences” of boosting data centers. Farmland often out-prices what young farmers can afford to break into the ag industry, Oftedahl said, but it’s not too much for corporations with billions of dollars to spare.

Incentivizing data centers, the fifth-generation farmer added, would give rise to companies “buy[ing] land up cheap, knowing that they can cash in on possible future expansion projects, such as power plants, substations, and transmission lines, things that are needed to support the high amount of energy production required.”

“Encouraging large-scale economic development like data centers risks discouraging many young people from choosing agriculture for their future,” Oftedahl said. “This isn’t simply a vote about a sales tax exemption. It’s a statement about our values. Is South Dakota still first and foremost an ag state, or is large industrial economic [sic] now more important?”

Sara Steever, a retired Lennox resident who formerly led Sioux Falls agri-marketing agency Paulsen, questioned whether companies “worth billions and trillions of dollars” needed the tax breaks.

“Turns out that the fact that we can provide access to the megawatts of energy that is needed is tremendously valu[able],” Steever said as a remote testifier. “These companies don’t need tax breaks. They need connectivity, which we already have.”

Dakota Rural Action Lobbyist Melissa McCauley said the bill would lead to a “huge miss on revenue” for the state, given what she perceived as the broad nature of the proposed exemption.

“We are concerned that nearly everything needed to outfit the data center down to its door locks, security cameras, and even the cost of laying the fiber to the center would be exempt,” McCauley said. She asked openly whether a fiscal note should be added to the bill.

Tax break eligibility would not be public record under Roe bill

The stipulation that a data center’s eligibility documents would not be public record rankled opponents—some lawmakers, too.

Austin Adee, a Deuel County resident, said that section of the bill would create an “NDA-shielded secret court.” House Speaker Jon Hansen, who is running for South Dakota governor in 2026, raked the measure over this.

“This particular measure lacks transparency,” said House Speaker Jon Hansen. “The information goes to the secretary of the Department of Revenue, who can unilaterally decide without real qualification whether or not there’s going to be a tax break or not, whether or not rates are going to pass on, whether rate increases are going to pass on to consumers, and the people aren’t entitled to see any of the documentation that supports that decision. I think that’s wrong.”

The bill split the few Democrats on the committee, with Rosebud State Rep. Eric Emery supporting the legislation and House Minority Leader Erin Healy, of Sioux Falls, against it.

Emery asked Roe if the initiative behind the data center push included any guarantees that they would bring the promised jobs and wage-growth, to which Roe responded, “there’s no guarantees.”

Roe expounded upon this later, though, by pointing to the property tax revenue Applied Digital would likely bring to Deuel County—”north of $5 million” per annum, the Hayti lawmaker said, which is close to half of the county’s total budget.

At one point, Emery made a motion to send HB 1005 to the floor without a recommendation from the committee. Assistant Majority Leader of the House Marty Overweg spurned the idea, calling it “bad committee policy.” The motion died on a 5–7 vote.

Healy noted the day’s hearing lacked testimony from Sioux Falls stakeholders, despite a surge of public input in the city.

“I do believe that there is potential economic impact for data centers, but I also believe that economic development should never move faster than public input and transparency and also accountability,” Healy said.

House members will likely have to take up the debate once more during the 101st Legislative Session, as State Sen. Casey Crabtree, a Madison Republican who works for an area energy provider, filed a similar bill in the hours after the committee’s Feb. 4 decision.

The new legislation, a self-titled “Data Center Bill of Rights for Citizens”—akin to Crabtree’s 2024 “Landowner Bill of Rights,” which offered concessions to carbon pipeline opponents in order to ease pipeline development in South Dakota—also intends to exempt data centers from paying a sales and use tax for purchases made in developing a site, while also clarifying regulatory authority and preventing electric rate shifts onto consumers.

Crabtree’s bill does not provide an end-date on the sales and use tax exemption.

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South Dakota

Sources: Rutgers to hire South Dakota’s Johansen as DC

Published

11 hours ago

February 6, 2026

Press Room

Sources: Rutgers to hire South Dakota’s Johansen as DC

Rutgers is expected to hire South Dakota head coach Travis Johansen as the school’s new defensive coordinator, sources told ESPN.

Johansen informed his team in a meeting on Friday that he’s leaving for Rutgers. He has agreed to a three-year deal, which is expected to be formalized shortly, sources said.

Johansen is a veteran defensive coordinator, including leading a highly regarded defense in 2024 at South Dakota before being promoted to head coach.

As a head coach, Johansen led South Dakota to the quarterfinals of the FCS playoff this year. The Coyotes finished ranked No. 11. He brings 14 years of defensive coordinator experience, which was part of the attraction to the Rutgers brass.

He’ll replace Robb Smith, who came in as defensive coordinator this year and finished No. 118 in team defense. Smith’s dismissal led to a lengthy search that culminated in an unexpected hire.

Johansen’s 14-year track record as a defensive coordinator includes impressive stints at South Dakota and NAIA Grand View.

In 2024 as the defensive coordinator at South Dakota, Johansen’s strong defense led South Dakota to the program’s first Missouri Valley title. The Coyotes also finished with a semifinals appearance in the FCS playoff.

The move by Johansen continues a trend of lower-division head coaches taking coordinator jobs at the top levels of college football, a byproduct of the financial discrepancy between the sport’s levels.

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South Dakota

How a ‘South Dakota kid’ became one of only three kickers to reach football immortality

Published

23 hours ago

February 6, 2026

Press Room

How a ‘South Dakota kid’ became one of only three kickers to reach football immortality

Karen Guregian’s football analysis is sponsored by Jeffrey Glassman Injury Lawyers, a Leading Boston Personal Injury Firm.

SAN FRANCISCO – Adam Vinatieri, the man with ice water in his veins with the game on the line, the kicker who chased down All-American sprinter Hershel Walker, said he was a bit nervous heading onto the stage to join this exclusive club.

Hearing his name, learning that he was headed to the shrine that honors the NFL’s very best, brought Vinatieri, arguably the greatest kicker of All-Time, to tears.

After getting a disappointing call last year and learning he wasn’t getting his ticket to Canton, the Patriots legendary kicker wasn’t sure how to feel this time around when he was a finalist for the 2026 Pro Football Hall of Fame class.

“So this year my expectations, I try not to have any, you know, I really was sitting there going, well, maybe it happens, maybe it doesn’t,” Vinatieri said. “Just being nominated and being in the finals with these guys, I look at that list and I go, ‘My gosh, how do you cut that down to 4 or 5 guys because it’s it’s a pretty amazing list?’

“So when I got the knock on the door. I will be the first one to admit I got teary eyed, and choked ‘em back a little bit because, just because of what it means, you know?”

It hit Vinatieri, especially after hearing his name announced with fellow inductees Drew Brees, Larry Fitzgerald, Luke Kuechly, and Roger Craig. He said it was all incredibly “surreal” the wave of emotions he felt Thursday night during the NFL Honors ceremony.

“Even when the Hall of Famers came up and shook our hands and said congratulations, you know, joining the club, I mean, there’s just no feeling like that,” Vinatieri said after the Hall of Famers were announced.

The former Patriot, whose career spanned more than two decades, joins just two other full-time kickers, Morten Anderson and Jan Stenerud, in the football shrine.

It was Anderson who knocked at his door to inform him he had been voted in during his second try.

“It’s a tough position to get in, but, yeah, you know, I never really thought about it too much while I was playing,” Vinatieri said. “I just wanted to keep on stacking, stacking stats, and it was never really about me and what I was doing.

“It was always about trying to help the team win games and how can we get to the playoffs and how can we get to another championship and all that stuff and then I guess once you’re done then you turn around and you look back on it and go that’s pretty awesome.”

Vinatieri started his career with the Patriots as an undrafted rookie of Bill Parcells. He was with the team for 10 seasons (19956-2005), before moving on with the Indianapolis Colts.

He was part of three Super Bowl winning teams with the Patriots, and one with the Colts.

“You know, with these guys, just to say you did it a long time and you did a pretty good job and got to put a couple exclamations on a couple of games was a wonderful experience for me,” he said, “but, those 10 years in New England, there was nothing like it … we built a dynasty, winning a bunch of Super Bowls in a short amount of time. That was a great, great experience for me, and one that I will cherish the rest of my life.”

Vinatieri is the NFL’s all-time leading scorer (2,673 points with an NFL record 599 field goals). He made 29 game-winning kicks in 24 seasons before retiring at age 48.

He will always be remembered for his 48-yard field goal in a blizzard in Foxboro during their first Super Bowl run in 2001, considered the greatest kick of all-time.

He’s now immortalized for all of his clutch game-winning kicks for two organizations.

“I’m just a South Dakota kid, right? I never thought I’d play very long,” he said. “I never thought I’d get, you know, to whatever. So at this point right now, I just pinch myself just thinking that I’m sitting up here with some of the greatest men to ever put a put a football uniform on and to be in the same class, to be, to be bound to these guys for the rest of my life. It’s just, it’s really, really humbling for me.”

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South Dakota

Bill to bring every school district opt-out to an election fails in SD

Published

1 day ago

February 5, 2026

Press Room

Bill to bring every school district opt-out to an election fails in SD

Thirty-nine legislators voted against a bill Feb. 4 in the South Dakota House of Representatives that would’ve brought every single school district opt-out to a public vote.

After Senate Bill 85 failed to pass, with 29 lawmakers voting for it and two excused, bill sponsor Rep. John Hughes, R-Sioux Falls, said he intended the bill to be reconsidered in the coming days, meaning the bill could’ve been heard again Feb. 5.

But by the time the House reconvened that day with SB 85 on the docket, Hughes didn’t choose to move to have the bill reconsidered.

He told the Argus Leader, in emails shortly after the bill was mentioned on the House floor, that it wouldn’t be reconsidered, and it’s most likely the case that the bill will remain dead. But that other bills affecting opt-outs are pending, and amendments could come forward.

Opt-outs allow school districts to raise additional operating funds beyond what they get in their existing tax levy, and in state aid, by “opting out” of those limitations to collect more taxes from property owners in the district.

“Only time will tell how this issue works itself out and whether a mandatory referral requirement will reappear in some other bill,” Hughes told the Argus Leader.

Bill sponsor skeptical of trust in school administrators

Hughes would’ve had an uphill battle to change minds and flip votes, as many of the legislators who spoke in opposition to the bill staunchly defended education, local control and the financial decisions made by superintendents, school boards and school districts.

Those legislators cited the fact that only 14 districts passed opt-outs over the last year, with five of those being referred to an election, and all five passing.

SB 85 is one of 19 recommendations brought by the comprehensive property tax task force that met over the summer. Sen. Sue Peterson, R-Sioux Falls, brought both the bill and the recommendation, both opposed by the Sioux Falls School District (SFSD). Peterson said it was not a “silver bullet,” but part of the solution to solve the property tax problem in the state.

Peterson has also brought SB 223, which would require petitioners to gather only 50 signatures in 40 days to refer an opt-out to an election. The bill has been referred to the Senate State Affairs committee.

Hughes noted Feb. 4 that last year’s resolution to convene the task force was approved by 64 Representatives.

“One thing we have all seen from the floor vote on SB 85, the House in 2025-2026 thus far is talking out of both sides of its mouth on property tax reform and relief, and the voters should take that into consideration in June and November, if this session continues its present course on property taxes, and that we should just ‘trust the school administrations’ in South Dakota,” Hughes said in a statement Feb. 5.

Sioux Falls was a focal point of the bill

In House debate Feb. 4 and in the bill’s prior hearings, it was clear the most recent opt-out passed by the SFSD Board of Education, and the inability of petition circulators to gather enough signatures to bring the proposal to a vote, was a flashpoint that led to the bill’s creation.

That opt-out for $2.1 million over 10 years — or $21 million — needed 5,490 signatures to be referred to voters, but only 2,302 signatures were turned in by the deadline, in 20 days.

One of the most outspoken petitioners, Misty Furness, noted the cost for the district to hold an opt-out election — $63,000 — is far less than $21 million, and said SB 85 is about giving taxpayers a voice.

Peterson said Jan. 22 in the bill’s first hearing in the Senate Education committee that it shouldn’t be the responsibility of voters to gather petition signatures to prevent districts from spending over the limits that have been set for them.

During the Sioux Falls school board’s work session Feb. 4, shortly before the House started debating SB 85, school board president Nan Kelly said the bill wouldn’t solve the property tax issue “in any real meaningful way,” and said opt-outs have historically been used to fill the gap between what’s available in state and local funding, and what’s needed.

District business manager Todd Vik noted the Legislature increased state aid to education at only 1.25% last year and is proposing no increase this year, and said SB 85 will make it “much more difficult to opt out.”

Kelly said the bill sets a “very dangerous precedent” and could lead to similar legislation being proposed for cities and counties.

That’s something SFSD lobbyist Sam Nelson brought up in his testimony against the bill in the House Education committee Feb. 2, arguing that if proponents believed SB 85 was good for schools, it should be good for all local units of government, including the general bill and special appropriations passed by legislators.

Part of the reason opt-outs are in place is that “for years, we have not adequately funded public education, which is your constitutional obligation to do,” Nelson told the House Education committee on Feb. 2.

He noted that people who disagree with opt-outs or other decisions made by school board members have two ways to deal with it: showing up at school board meetings and making public comments, or “one of the greatest referendum tools,” the ballot box.

Rep. Brian Mulder, R-Sioux Falls, said he’d heard from SFSD that only one person made public comments on the budget cycle, and only two people emailed Superintendent Jamie Nold about the budget, noting that people already have the opportunity to influence school board and district decisions.

Districts ‘glibly ignore spending limits,’ proponents argue

In prior committee hearings, SB 85 was endorsed by lobbyists for the Freedom Foundation and Americans for Prosperity.

Legislators who spoke in favor of SB 85 Feb. 4 largely argued that taxpaying voters need to have a say in opt-outs that school boards want to pass, and that part of “local control” is for local school board voters to be part of decisions in their local school districts.

Hughes had argued that a number of school districts across the state “glibly ignore spending limits.”

In his rebuttal, he said his sons shouldn’t have to go to school board meetings and “plow through budgets” that make “all of us gloss over.”

He also said that in December, Nold gave a “wonderful defense for everything he’s doing to continue, according to the status quo,” and said that if legislators don’t pass SB 85, “we ought to just give everybody a trophy and go home.”

Rep. Terri Jorgenson, R-Rapid City, argued SB 85 is not about schools or education funding, but about taxpayers’ consent. She said there are 79 active opt-outs across the state levying $43 million in excess property taxes.

SB 85 takes tools out of education’s toolbox, opponents argued

In prior committee hearings, SB 85 was opposed by lobbyists for the Sioux Falls School District, Rapid City Area Schools, Associated School Boards of South Dakota, School Administrators of South Dakota, South Dakota Education Association, South Dakota United School Association, the Large School Group and the Greater Sioux Falls Chamber of Commerce.

Since the petition group in Sioux Falls didn’t gather enough signatures, ASBSD lobbyist Heath Larson said it’s possible local constituents were supportive of the district and trusted what school board members were doing.

Large School Group lobbyist Dianna Miller argued that putting a mandate like SB 85 on schools isn’t “limited government,” and said that the property tax problem shouldn’t be “solved on the backs of school districts” alone, something Rep. Mike Stevens repeated on the House floor.

Reps. Erik Muckey, Jim Halverson, Tim Walburg, William Shorma, Roger DeGroot, Keri Weems, Stevens and Mulder all spoke against the bill on the House floor.

DeGroot said school districts pass opt-outs because “we’re not doing our job here,” referring to legislators’ power to increase education funding in Pierre. He added the lack of a proposed increase in state aid to education this year “makes absolutely no sense to me at all.”

Stevens said all legislators do recently is “take tools out” of education’s toolbox, and that if SB 85 passed, “there’d be no more tools in that toolbox.” He noted districts must publish public notices and hold public hearings when school boards plan to vote on or pass opt-outs.

Walburg said he trusts his superintendent and school board members, and that the state shouldn’t dictate what they can do. He noted that 57% of his property tax bill went to schools, which he said was about $265 twice a year.

Halverson said one of the superintendents in his legislative district had asked him to vote no and respect local control. Weems also said constituents in her district value what their property tax does for education, and that she voted against the bill and in favor of local control.

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